When you come across conversations or topics about money, the economy, stock markets or interest rates, do you get daunted and immediately want to turn the other way, or are you curious and intrigued to learn and understand how it works? If you choose the latter, keep reading- a degree in financial investment might interest you!
What is Financial Investment?
Finance is the procurement and management of financial resources (including cash, bonds, assets, property, stocks, etc) by individuals, companies and governments.
A financial investment is the act of leveraging your financial resources into an asset with the hope that it will accumulate into a larger sum than what was put in, over a stipulated time frame. The time frame could range anywhere from a few months or for a span of decades.
People choose to invest in order to have more financial security in the future. How much time you’re willing to put into your investment is a key factor to consider. The more time you have, the more risk you can take, and the more risk you take, the more potential for making more money, and vice versa.
A degree in finance prepares students to acquire, administer and allocate wealth, to make informed decisions within financial and trade markets and draw connections between risk and rewards. In order to excel at a career in financial investment, you need to have a keen eye for detail, enjoy taking up challenges and solving problems, excel at critical and analytical thinking, and possess a great deal of discipline and patience, as you will be subjected to an immense amount of pressure and stress.
Types of Financial Investment
Areas of Study
Corporate Finance
Economics
Statistics
Mathematics
Business
Risk Management
How to Determine Good or Bad Investments
Investments are made with the hope for potential gains in the future- there is always a certain level of risk attached to it. An investment may not generate any income, or even end up losing value over time.
There are a plethora of available choices when it comes to investing. The distinction between a good or a bad investment is not always black or white- but there are certain red flags and positive signals that could help you identify what is worth putting your time, money and effort into.
1. Stock Prices
- Analyse a stock’s price change over a financial year, to get a sense of the overall performance
- Calculate the stock’s price-to-earnings ratio
- Compare the results with the average price-to-earnings ratio (approx. 15). If the results exceed or severely miss the price-to-earnings ratio, it could be an indicator that the stock is either priced too high or too low- which calls for further investigation
2. Balance Sheet/ Financial Statements
- Look at the company’s most recent financial statements and quarterly reports to determine if they are profitable
- Compare profitability, sales and market share with other companies in the same industry and see if they have a competitive edge- which often makes for good investments
- Identify economic risks common to the industry. Assess how these conditions could affect short-run and long-run returns on investment
3. Bonds
- Identify the return % on the bond (use an investment calculator) and compare yielding results with other bonds to see if you stand to receive a fair return
- Categorise potential bonds into investment grade and non-investment grade: investment grade bonds are more reliable (the lower it ranks, the better) while the latter pays higher yields but carries the threat of default
- Figure out the time frame in which you want to start earning your gains, and see if it matches up to your investment timeline. Some bonds mature in a matter of years, while others might take decades
Via The Nest
Signs of a Bad Investment
1. Your Financial Advisor Stands to Gain a Big Commission
Financial Investors are not legally required to act in your best interest, and more often than not, when they are working on a commission basis, they will prioritise their interests over yours. They may recommend investments that do not match what you are looking for, if they stand to earn money from your buying it. If they charge you commissions up front, your advisor has no incentive to provide you with the best incentive regarding your investment, so avoid those as well.
2. Everyone is Buying It
Following the herd and investing in what’s most “hot” at the moment might not be the best idea- these stocks are prone to rise quickly, but they often fall just as quickly too. While many want to get rich quick, jumping on the latest bandwagon might not work out for you, or it just might.
3. It Sounds Too Good to be True
If you are being pitched an investment idea that carries zero risks, with guaranteed returns and quick, you might be led into a scam. All investments carry risk.
4. It Doesn't Match Your Risk Tolerance
Of course, an investment opportunity that is a bad fit for someone else might be the perfect one for you; ultimately it comes down to how much risk you are willing to take. If you need returns quickly, it doesn’t make sense for you to take up high-risk stocks as you don’t have the time to wait for them to recover.
5. Investments that Carry Surrender Charges
Some investments carry surrender charges, meaning if you want to get out of an investment, for any reason, you are not allowed access to your money without paying a hefty fee.
6. Investments with Limited Marketability
Investing in illiquid assets (ones that do not have much trading volume) limits your access to your funds as well, limiting flexibility.
7. Confusing Investments
If you are unable to understand the investment, or if it sounds too complicated, you could either ask more questions, or hire a professional to evaluate the investment. If the salespeople cannot explain the details of the investment in plain English, walk away.
Via: Fool.com & TheBalance.com
Common Questions by an Investor
Why Invest When I Can Just Save Money With Zero Risk?
With an investment, you are putting your money in the hands of a firm, expecting it to grow and provide you with positive returns in the form of capital gains, dividends, and interest. Cash in its original form will not grow by itself, and may even lose its purchasing power over time due to economic fluctuations or inflation.
Should I Invest All My Money In a Single Stock?
You could be tempted to pour all your money in a single investment that looks promising, but it is more advisable to consider investing in small amounts at regular intervals instead, to reduce potential risk from market conditions.
Where Can I Invest My Money?
For many people, when it comes to investing, stocks are the first thing that comes to mind. But there are a diverse array of investment choices- bonds, real estate, commodities, and even money. You could also choose to invest in different industries in order to reduce risk.
Misconceptions About Investments
I Need a lot of Money to Start Investing
While it’s true that more money will allow you more options, more investing and get you more returns, it’s not necessarily a requirement. Many brokers now allow you to invest even with pocket change. Starting small means you get to start early on.
I Need to Wait Until I’m Older to Start Investing
You are more likely to have more financial commitments when you’re older, like starting a family or buying a house, which might make allocating investment funds challenging. Also, if you start investing later in life, you might be tempted to take on riskier investment, hoping for a quicker return, which could lead to loss with no time to recover from it. Starting small and keeping it going for a long period of time allows you to take advantage of reinvesting and the compound effect.
Investments Tie My Money Up for a Long Time
The length of the investment is entirely up to you and your investment needs. Short and medium term investments allow you to take advantage of market opportunities and cash out in a matter of months or years, while long-term investments are for those willing to withstand the short-term fluctuations in the market.
Investments are the Same as Speculations
Investments are long-term commitments, and the gaining the returns is expected to take several years. Hence, they are made after careful consideration and several risk benefit analyses, once proven to be worthy. Investors look to expand their investment portfolios over time.
Speculation, on the other hand, is short-term and attempts to capitalise on market inefficiencies for a quick profit. While speculators do make informed decisions as well, they are subject to higher risks than traditional investments as they are often pure, directional bets on prices.
Investments are the Same as Gambling
When investing, you are putting money into a cause, expecting it to provide you with returns in the future. They carry risk, but are expected to have positive outcomes.
Gambles are based entirely on chance, and do not require money to be put in. They carry risk, and are expected to have negative returns in most cases.
How to Become a Financial Investor
Career Opportunities with a Degree in Finance
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Entry Requirements to Study Finance in Australia
STPM/ GCE A Levels or Equivalent | A minimum score of 12 points |
International Baccalaureate Diploma Program | A minimum score of 30 points |
Foundation/ Diploma | CGPA 2.0 |
ATAR | Achieve a Competitive Selection Rank (80-90) |
UEC | 30 |
*The requirements may vary among universities, for inquiries on other entry requirements, contact Excel Education.
English Requirements to Study Finance in Australia
IELTS | A minimum overall of 6.5 and 6.0 in all sub-bands |
TOEFL – IBT | A minimum overall score of 85; Minimum 17 in Reading, Listening and Speaking and 19 in Writing |
TOEFL – PBT | A minimum overall score of 565 and minimum 5 in Writing |
Pearson Test of English (PTE) | A minimum overall score of 58 and and 50 in all sub-bands |
*The requirements may vary among universities, for inquiries on other entry requirements, contact Excel Education.
Recommended Universities to Study Finance in Australia
1. The University of Melbourne
Image via University of Melbourne
Program | Bachelor of Finance |
Intake | July |
Duration | 3 years (full time) |
Indicative Annual Fees (2021) | AUD $44,756 |
2. University of Queensland
Image via University of Queensland
Program | Bachelor of Advanced Finance & Economics (Honours) |
Intake | July |
Duration | 3 years (full time) |
Indicative Annual Fees (2021) | AUD $43,888 |
3. Monash University
Image via Monash University
Program | Bachelor Finance |
Intake | July |
Duration | 3 years (full time) |
Indicative Annual Fees (2021) | AUD $45,000 |
4. University of Sydney
Image via University of Sydney
Program | Bachelor Commerce (Finance) |
Intake | July |
Duration | 3 years (full time) |
Indicative Annual Fees (2021) | AUD $46,000 |
5. University of Adelaide
Image via University of Adelaide
Program | Bachelor of Finance |
Intake | July |
Duration | 3 years (full time) |
Indicative Annual Fees (2021) | AUD $43,000 |
6. University of Wollongong
Image via University of Wollongong
Program | Bachelor of Mathematics & Finance (Honours) (Quantitative Corporate Finance & Investments) |
Intake | July |
Duration | 4 years (full time) |
Indicative Annual Fees (2021) | AUD $33,840 |
7. Western Sydney University
Image via Western Sydney University
Program | Bachelor of Business (Applied Finance) |
Intake | July, November |
Duration | 3 years (full time) |
Indicative Annual Fees (2021) | AUD $28,922 |
8. La Trobe University
Image via La Trobe University
Program | Bachelor of Finance |
Intake | July, November |
Duration | 3 years (full time) |
Indicative Annual Fees (2021) | AUD $37,400 |
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About the Author
Rifqa Abdulla
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